NEW YORK TMK Ipsco, the North American subsidiary of Russian pipe and tube maker OAO TMK, expects some importers to rein in shipments toward year-end from nine countries targeted in a recent anti-dumping case on oil country tubular goods (OCTG).
"Well see a behavior change coming later in the year, towards the fourth quarter, as those countries who manage their own imports through trading companies will continue to probably bring product. But those importers of record who are privately owned companies (and are) taking the risk of any bonds or duties that need to be posted will likely begin to withdraw," senior vice president and chief commercial officer Scott Barnes said during TMKs second-quarter conference call.
Meanwhile, end-users have started to show some concern about possible supply channel disruptions from the case, according to Barnes, with the expectation that they will "swing more towards a higher mix of domestic production as we get closer to year-end and the Department of Commerce investigations continue," Barnes said.
Commerce has until Dec. 9 to make its preliminary decision in the cases unless extensions are granted (amm.com, Aug. 16).
Houston-based TMK Ipsco has seen a continued shift toward more program business in OCTG, with about three-quarters of the companys sales of the product now coming from longer-term agreements with end-users, TMK Ipsco chairman Piotr Galitzine said.
"Weve seen a dramatic shift in our business to an increase in program business, and this program business is getting much longer. A program of a year or two is not uncommon now, where a year or two ago a program of six months was considered a long (one)," he said during the call.
TMK Ipsco has already entered into some supply agreements lasting three years, with one even lasting five years, Barnes added.
End-users are moving to longer agreements due to increased standardization of drilling activities and the increased negotiating leverage they derive from placing large-volume orders, he said.
The financial performance of TMKs Americas division, meanwhile, was impacted by weak pricing in the second quarter even as shipments improved.
"Competition against imports and building of inventories have caused continued downward pressure on prices," Galitzine said.
Revenue in the Americas division declined 7.8 percent to $413 million in the second quarter from $448 million in the same period a year ago. Adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) fell 51.5 percent to $33 million from $68 million, even as shipments rose 7.6 percent to 255,000 tonnes from 237,000 tonnes in the same comparison.
The fall in sales prices hasnt been offset by lower raw materials prices, but Ipsco believes rising hot-rolled coil tags have peaked.
"This run-up has plateaued, and we expect hot-rolled coil prices to come down in September and continue to trend down as we dont see any major drivers that would support a long-term price hike," Galitzine said.